Depreciation expense in the declining balance method

The **declining balance method** of depreciation is an accelerated depreciation method where an asset loses value more quickly in the earlier years of its useful life. Unlike straight-line depreciation, which allocates the same amount of depreciation each year, the declining balance method applies a constant depreciation rate to the **book value** (the asset's value at the beginning of the year after accounting for prior depreciation).

### Formula:
\[
\text{Depreciation Expense} = \text{Depreciation Rate} \times \text{Book Value at Beginning of Year}
\]
The **depreciation rate** is often double the straight-line rate in the **double-declining balance method**, which is one of the most common forms of this method.

### Steps to calculate depreciation using the declining balance method:
1. **Determine the depreciation rate**: For the double-declining balance method, the rate is $ \frac{2}{\text{useful life in years}} $.
2. **Calculate the book value** at the start of the year: This is the asset's original cost minus any accumulated depreciation from previous years.
3. **Multiply the book value** by the depreciation rate to get the depreciation expense for the current year.
4. **Subtract the depreciation expense** from the book value to update the asset’s book value for the next period.
5. **Repeat** this process for each year of the asset’s useful life, noting that the book value will decrease over time.

### Example:
Suppose an asset costs $10,000, has a useful life of 5 years, and the company uses the double-declining balance method. The steps are:

1. **Straight-line rate**: $ \frac{1}{5} = 20\% $, so the **double-declining rate** is 40%.
2. **Year 1 depreciation**: $ 10,000 \times 40\% = 4,000 $, so the book value at the end of Year 1 is $ 10,000 - 4,000 = 6,000 $.
3. **Year 2 depreciation**: $ 6,000 \times 40\% = 2,400 $, and so on.

The process continues until the book value is either fully depreciated or reaches a predetermined salvage value.

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### Expanding Questions:
1. What is the difference between the declining balance method and straight-line depreciation?
2. How does the double-declining balance method compare to other accelerated methods like sum-of-the-years-digits?
3. Can you explain the impact

Understand how to calculate depreciation expense using the declining balance method, an accelerated depreciation method. This guide includes the double-declining balance method formula, with a step-by-step example of an asset worth $10,000 with a 5-year useful life.

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